State and federal mandates coupled with increased member interest are driving expanded co-op investment in energy efficiency (EE) and other types of demand-side management (DSM) programs.
In 24 states, regulators and lawmakers have established Energy Efficiency Resource Standards (EERS) requiring utilities to meet specific energy efficiency targets. Fifteen of those states require some or all of their co-ops to hit those targets, with mandates also calling for incremental annual increases in EERS energy savings in coming years.
At the same time, federal and state actions to reduce carbon dioxide emissions are expected to rely, at least in part, on increased use of EE programs.
Consumers also appear to support increased investment in energy efficiency and demand management programs. A 2013 survey of 32,000 customers nationwide found that nearly half of them wanted their utility to offer more EE programs and services. A year later, another study reported that satisfaction levels among investor-owned utility customers was higher for those who knew about the utility’s EE and conservation programs.
Similar findings have been reported in surveys of co-op consumers. “Energy efficiency programs are some of the highest-priority value-added services that we have at our disposal,” said Tom Laing, director of market research at TSE Services, a Touchstone Energy® partner organization that conducted the nationwide co-op network’s 2015 Survey on the Cooperative Difference.
A Principled Response
Staff and financial constraints at many co-ops can complicate efforts to meet these evolving governmental mandates and heightened member interest. Sprawling, sparsely populated service territories combined with small staffs may make it difficult to develop, market, and implement new EE programs.
But that’s where the sixth cooperative principle, “Cooperation among Cooperatives,” can emerge as a business asset. Co-op collaboration on innovative, energy-saving programs—whether through a G&T or statewide co-op association, more informally among neighboring co-op systems, or in combination with other co-ops and service vendors—can make it possible for smaller co-ops to launch effective EE offerings.
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Collaboration offers a range of advantages:
Economies of scale leads the list of benefits co-ops can realize through collaborative efforts. Co-ops working together can negotiate for bulk discounts on the price of products like LED lightbulbs, substantially reducing the cost of this simple EE initiative to both the co-ops and their members.
Joint product procurement allows collaborating co-ops to buy a single product, such as an energy-audit calculator, for use by all of the participants. For example, Old Dominion Electric Cooperative, the Richmond, Va.- based G&T, pays for an energy calculator subscription for all 11 of its member systems. Co-ops could also pool funds to purchase audit software customized to the climate and building-construction characteristics of their area.
Shared services are another option for collaborating co-ops. Western Farmers Electric Cooperative, a G&T based in Anadarko, Okla., hired a geo-engineering firm to provide the specialized services needed to launch an extensive geothermal heat pump installation program. That proved to be a big help for many of the G&T’s members, where budget constraints and the absence of local expertise had put heat pump offerings out of reach. Western Farmers Electric hopes to install 1,000 geothermal pumps a year, working toward a goal of cutting peak load by 30 MW by 2020.
Centralized program management is also fertile ground for reducing the costs and staff burdens of rolling out a comprehensive EE program. By concentrating DSM activities at the G&T or statewide-association level, co-ops can free their own staffs to work directly with members. Other benefits include customizable program materials; common training for staff and contractors; smoother interactions with vendors, suppliers, and contractors; centralized tracking and reporting procedures; simpler evaluation, measurement, and verification of results; and the opportunity to offer more programs.
Peer learning rounds out the roster of benefits from EE cooperation. Co-ops admire and acquire each other’s ideas, whether working together through a G&T or statewide association or simply sharing information about a program by e-mail. Delaware Electric Cooperative in Greenwood, Del., for instance, launched a DSM program called “Beat the Peak” and has since helped more than 90 co-ops around the country start up similar offerings. And Delaware Electric has gotten a lot of help in return, says Jeremy Tucker, manager of marketing and communications. “By sharing information with cooperatives around the country, we have learned about new and different ways to market the program to a variety of member audiences.”
The Flip Side
Some challenges do crop up in collaborative efforts to expand EE and other DSM programs:
Individual control can be weaker for each participating co-op. Compromises may have to be made in program design, and branding and marketing may have a different look or feel from what an individual co-op may put together.
Program complexity may increase along with the offerings available within a collaborative effort. More expansive programs are naturally more complex, and creating such programs may require more time and discussion than one launched by a co-op acting alone.
Uneven contributions by participating co-ops can become a challenge too. When working with many co-ops, not all are likely to have equal staff and money to contribute to the larger effort. Setting expectations early, clearly, and in writing can reduce the frustrations arising from this challenge.
In the Real World
East Kentucky Power Cooperative (EKPC) in Winchester, Ky., is a G&T with a long history of DSM offerings. Five years ago, it moved to maximize energy savings and reduce peak loads by centralizing management of many of its DSM programs.
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The G&T contracts with consultants that use sophisticated data analytics in planning those programs, and member co-ops participate in a DSM Steering Committee to oversee program development and implementation.
EKPC also trains member co-ops’ energy advisors on the EE and DSM programs, reimburses distribution systems for rebate payments to consumers, and covers 50 percent of member systems’ costs for administering those programs. In addition, the G&T develops marketing and advertising materials and pays for 75 percent of EE-related advertising.
Moreover, the G&T reimburses member systems for net lost revenue resulting from lower energy sales, and it has implemented a tracking system to collect information on energy savings and costs for use in reporting to regulators.
The results have been impressive, according to a presentation by EKPC’s Scott Drake, manager, corporate technical services, at TechAdvantage® 2015. Member participation in EE programs climbed 50 percent from 2012 to 2013, and participation in DSM efforts went up 133 percent over the same period. Meanwhile, the G&T continues to add DSM offerings.
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PNGC Power, a G&T based in Portland, Ore., provides its 14 member co-ops with regulatory management assistance to streamline participation in an EE incentive program operated by Bonneville Power Administration, the region’s federal hydropower marketing agency.
Reporting requirements under the Bonneville program can be cumbersome and time-consuming, but PNGC staff has become familiar with the process. “I consider myself an extension of the distribution co-op staff,” said Margaret Ryan, the G&T’s manager of member services.
PNGC is also able to report to Bonneville as a single entity, further reducing paperwork burdens at the distribution level. That also allows for more flexible management of Bonneville’s incentive funding. If one member doesn’t use all of its allotment of EE support from the hydro supplier, a fellow PNGC member may be able to.
As another benefit, operating as a single unit makes the 14 co-ops one of Bonneville’s largest customers. That gives the co-ops increased lobbying heft with the agency and other regional regulators. “We have a seat at high-level Northwest energy and power meetings and can advocate for our member cooperatives based on these discussions,” Ryan said, adding that Bonneville and other agencies “listen to us and have made changes to programs and processes based on our input.”
Michigan Electric Cooperative Association (MECA), a statewide in Lansing, formed its MECA Energy Optimization Collaborative, made up of eight co-ops and four municipal systems, in response to a 2008 state law mandating EE programs result in 1 percent annual savings in electric use.
The statewide’s collaborative provides a wide range of services, including overall administration of programs like rebates; financing; appliance recycling; energy audits; low-income programs; efficient heating, ventilation, and air conditioning; agricultural and farm services; and commercial and industrial offerings.
Making extensive use of contractor networks, the optimization collaborative handles design, implementation, tracking, regulatory compliance and reporting, and legislative issues arising from the 2008 law.
It’s a streamlined and cost-effective approach. The program has just one website, one implementer, and one evaluation, measurement, and verification contractor, instead of 12 of each. Bulk purchases have also lowered equipment costs. All told, these joint investments contribute to an estimated savings of more than $1 million a year.
Finally, operating as a collaborative has given the 12 participating utilities a stronger lobbying presence in negotiations concerning the law. For instance, Art Thayer, MECA’s director of energy efficiency programs, persuaded regulators to conduct a single evaluation instead of 12 separate ones.
As Thayer told the Midwest Energy Solutions Conference in 2014, that change alone produced a savings of more than $4 million for the collaborative’s members.
American Residential Conservation Services (ARC) is a vendor and implementation contractor that works with co-ops on encouraging consumers to improve their homes’ energy efficiency.
Butler Rural Electric Cooperative in El Dorado, Kan., was among the first co-ops to sign up for ARC’s Attic Report Card program. Rather than going through a whole-house energy audit, homeowners get a 12-point report focused on energy loss through their attics, along with information on improvements they can make.
The co-op and ARC then developed Comfort Plus, a program that lets members finance necessary attic improvements with payments added to their electric bills.
“Members who participate in the Attic Report Card and Comfort Plus pay an average of $37.25 per month for the insulation improvements,” says Travis Griffin, member services director at the co-op, “but realize savings of an average of $54.91 per month.”
ARC offers both as turnkey programs, according to Jim Snyder, the company’s president. “We handle about 95 percent of the administrative work. For its part, the co-op only needs to put the line item for the amount to be repaid on the bill.”
Before it can launch a collaborative EE or DSM program with anyone else, a co-op needs to review what it’s doing currently, looking at its existing programs as well as new offerings its members may be interested in.
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That review provides a basis for evaluating DSM schemes offered by other, larger utilities that may prove useful. After that, the co-op should check with nearby co-ops, its own G&T or statewide association, and other companies or organizations that could be partners in its EE or DSM efforts.
The next step is a familiar one: Networking with potential collaborators. Potential EE and DSM programs should be a topic of discussion at statewide association events, G&T meetings, and informal gatherings of co-op peers.
Together, likely collaborators can then develop a written description of the planned program, laying out clearly defined roles and decision-making authority, detailing cost-sharing plans, and providing clear communication and feedback channels.
Finally, the partners should verify that they have solid tracking, reporting, and accounting systems in place. Collaborators will need a way to divide incentives, payments, labor, and contractor costs equitably, and their reporting, billing, evaluation, and measurement systems will need to be brought into alignment.